TPPA at risk as the US political pendulum swings towards trade isolationism

PATTRICK SMELLIE

Last updated 05:00, March 17 2016

CHRIS KEANE/REUTERS

When Donald Trump says he wants to "make America great again", he means shutting foreign competitors out the US domestic market. Hence the Trans-Pacific Partnership Agreement is a "terrible deal".

OPINION: Whatever the outcome of the United States presidential primaries, let alone the presidential election later this year, there is no doubt that we are watching the strongest challenge to the 30-plus year consensus on the benefits of globalisation.

That pendulum is swinging, embodied in the strength of the campaigns by two 'outsider' candidates – Donald Trump on the mercantilist right and Bernie Sanders on the protectionist left – in the US.

From New Zealand's perspective, their most significant impact may be their capacity to push the US back to the isolationist roots that characterised its engagement with the rest of the international community in the first half of the 20th century.

That isolationism could take many forms, but its greatest appeal to a generation of American workers who feel left behind by globalisation is in its impact on trade policy.

Both Sanders and Trump are, in their own way, wanting to pull up the drawbridge on the last 30 years of global trade liberalisation.

That is for the understandable but regrettable reason that the massive increase in income and living standards that globalisation has fostered in poorer countries has been at the expense of jobs for people in the world's richest country.

That wealth is seen, justifiably, as having been concentrated in the hands of a tiny corporate elite, many of them Americans, whose greed and political influence have obscured the wider benefits of a freer trading world for billions of people.

When Trump says he wants to "make America great again", he means shutting foreign competitors out the US domestic market. Hence the Trans-Pacific Partnership Agreement (TPPA) is a "terrible deal".

The prosperity created in developing economies by trade liberalisation has no domestic US political appeal. Instead, it has destroyed the livelihoods of average Americans who never felt wealthy to start with by creating work elsewhere.

Embracing the internationalist upside of that proposition is a luxury if you feel your own job is threatened.

Prime Minister John Key glibly suggests that Trump's and Sanders' opposition to the TPPA is proof that it must be a good deal for New Zealand.

Certainly, if it's such a great deal for corporate America – as the TPPA's opponents here claim – there's precious little evidence of that from a US Congress allegedly stacked with US corporate cheerleaders.

As a result, the sometimes pro-trade Democratic candidate front-runner, Hillary Clinton, is rushing to burnish her protectionist credentials, while the Republican alternatives to Trump are equally unenthusiastic.

That being so, the prospects for outgoing President Barack Obama to push the TPPA onto the legislative agenda in Washington are diminishing. The least attractive option – sliding it through during the 'lame duck' session of Congress before a new president is inaugurated – may become the only option. And even then, it may fail.

If it does, then that is probably the end for TPPA, which would of course be cheered by its many opponents.

However, that is bad news for New Zealand and other countries seeking to trade across borders.

Already, it should be forcing a rethink of trade policy.

New Zealand has hung its hat on being a principled first-mover in pursuit of 'high quality' free trade agreements, seeking to demonstrate that dismantling barriers to trade has ultimately been worth the pain of adjustment.

If that argument fails politically in the US, then it probably also fails globally.

It won't matter how strong the economic evidence may be, it will mean a retreat to lower living standards and lower growth, although it may be most masked in those economies best able to fend for themselves behind protectionist walls.